More Clever Economic Indicators

Professors, economists and company chiefs share some off-the-beaten-path insights.

December 12, 2009: Forbes.com
by Knowledge@Wharton

Rock fish, 401(k) withdrawals, shopping bags and snowflakes: When deciphering America's economic future, tea leaves come in many forms. To get a good read, Knowledge@Wharton asked a few professors, economists and company bosses in a range of industries what they saw in their cup of tea--which economic indicators they planned to watch during the final quarter of 2009, and what they are waiting to see in 2010 that would convince them the economy is turning around. On the macro side, from retail to real estate, finance to factories, the central theme of employment echoed again and again. Retailers linked it to consumer confidence, real estate watchers to office space, bankers to loan losses, and manufacturers to product demand.

Indeed, Wharton real estate professor Susan Wachter believes that high unemployment will persist through 2010, impacting the real estate market. Although the residential housing market is turning around, the commercial real estate market is the next shoe to drop, and that isn't going to turn around until employment does, she says. "Commercial is a lagging indicator, and it follows employment. Employment itself is a lagging indicator. Probably six months after we see employment improving we'll see commercial improving, and we don't see employment changing in 2010."

Steven Silverstein, for one, is preparing for a long haul. The CEO of Spencer Gifts, a mall retailer that targets the 18- to 24-year-old demographic, Silverstein says he's "adjusting to the new normal" of a cautious consumer. "The consumer has a different mindset now.... We're not going to see the revenue growth that we have been accustomed to in the past."

On a macro level, Silverstein is keeping an eye on inflation and employment--especially teen employment, since his stores appeal to young people. Store to store,he's looking more closely than ever at his margins, keeping inventories tight, focusing on efficiency and expenses, and getting costs out of the system. "Everybody realizes we have to tighten our belts a little bit."

The number one economic indicator for Silverstein is consumer confidence. "I don't sell anything that people need. I only sell things that people have to have," Silverstein says of his store's offerings. "We're all about how the consumer is feeling and what's in his or her wallet." He remains optimistic that consumers will come back eventually. "They're resilient," he says. "Nobody likes to stay home forever. We might be pleasantly surprised in the fourth quarter."

Retailers aren't the only ones watching retail sales. Bankers are too. "Everyone's looking for that magic indicator," says Paul Merski, senior vice president and chief economist of Independent Community Bankers of America, an association of more than 5,000 community banks throughout the U.S. "The one thing I would look at is holiday retail sales. If that's down in the dumps, it's an indication that confidence hasn't returned and risk-taking hasn't returned. ... The strength of the economy is still tied very much to personal consumption spending."

Merski says he's also watching any indicator linked to jobs. "If you have roughly 10% of the workforce idle, that is a significant drag on consumer confidence ... and the capacity to spend." In addition, bank customers haven't been taking out enough loans. "Loan demand has decreased dramatically," says Merski, adding that the common refrain that credit is hard to get isn't really true. The fact is, banks would like to make loans--after all, loans mean income for a bank--but consumers and businesses are too nervous to borrow. "Both businesses and households are de-leveraging, repairing their balance sheets and not seeking as much credit," he says. "As a small business, if your sales are down and you're laying off workers, why would you need more credit?"

One of the biggest question marks in retail is how long consumers can hold off on spending the way they used to, says Wharton operations and information management professor Marshall Fisher. Last year, consumers "hunkered down massively when the economy tanked," and retailers were caught off guard. With holiday sales sluggish, inventories piled up, and retailers were forced to slash prices to unheard of lows to get merchandise out the door. Since then, consumer behavior has changed. Consumers are delaying purchases and trading down to lower-priced items. "It remains to be seen whether that will persist," Fisher says. "If you talk to people from Walmart, they'll say, 'These customers are ours for good. There's been a sea-change in how people think about consumption.' Talk to people from [luxury retailer] Tiffany ( TIF - news - people ), and they will say, 'The fundamentals of human behavior are invariant. People will go back.' I would say that's a big, big question mark."

Underlying that question mark is the issue of leverage, Fisher points out. Before the recession, "the buoyancy of the economy was driven by leverage." People borrowed, spent, took out money from home equity loans and spent again. Today, with unemployment rising and home prices stagnant, "consumers--instead of borrowing money--are paying down their debt," Fisher says. "Will that persist? If it does, then that has long-term implications."

More Savings Accounts for Children

Household insecurity is familiar to R. Michael Menzies, president and CEO of Easton Bank and Trust in Easton, Md. "We have one of the highest unemployment rates in all of Maryland," Menzies says. A wealthy retirement community, Easton has grown in the past few years due to in-migration and real estate activity. But the recession has cast a pall over that growth. Loan losses are at a record high as asset values have fallen and over-leveraged customers have lost their jobs, Menzies says. Delinquencies are also up. "When they begin to trend down, that will be an indicator that people are going back to work."

Menzies doesn't stick to paper indicators to show him where his business might be headed. "I can tell you that we have some of the best rock fishing in the history of the Chesapeake Bay, and I'm the only boat out there right now," he says, wondering if his fellow fishermen are having trouble putting fuel in their boats. Another possible economic sign for Menzies: restaurants. "When people eat, they feel good. ... [Right now], restaurants are average to slow. In this community, when the restaurants pick up, it indicates people are making money and going out to eat."

For some bankers, the careful consumer is actually good for business. Arkadi Kuhlmann, president and CEO of ING ( ING - news - people ) Direct--an online bank based in Wilmington, Del., that advertises low fees and simple ways to save -- has seen an influx of new customers since the recession took hold. The number of children's savings accounts jumped 28% this year, for example. "Parents are opening accounts for their children and teaching them how to save," he says. "I think Americans have gotten the message of getting your debt down. ... We're not going back to the way it was before. ... I haven't talked to a person in the last year who hasn't cut back on a trip, decided against a purchase or scaled back in some way. ... People are saving. And they're actually reducing their debt more than they're saving."

Kuhlmann sees signs that his customers are still under economic duress. While there is evidence of new customers opening savings accounts and retirement plans at the bank, there is also a troubling trend of customers borrowing from their 401(k)s and IRAs. "It's a bit strange that we have an increase in saving, a decrease in debt, and people are still taking money out of their 401(k)s." Kuhlmann says. "People tapping into their 401(k)s show they're still under stress." A decrease in 401(k) withdrawals will be a sign for Kuhlmann that the economy has turned around.

He even sees signs of the weakened economy in his staff, who have held on to their jobs since the economy slowed. Company surveys show employee engagement is down--yet turnover has all but ceased. "If turnover increases, that means people are out there looking for more opportunities," Kuhlmann suggests. "We traditionally have about an 18% turnover. This last year it's been 3%. ... People just don't move. [Our first thought] is that this is really great. ... People are staying because they want to be here. The truth is that probably a bunch of people do want to leave but can't."

Low turnover is bad business for Douglas E. Frost, owner and president of Frost Manufacturing in Worcester, Mass. Frost is in the "marking and identification business," making name plates, badges, building directories, rubber stamps and placards for companies in Massachusetts and beyond. One bit of steady work has typically come from a Fortune 500 company that makes information storage systems. For years, the company contracted with Frost to make name plates for new hires. Before the downturn, he churned out 50 to 70 name plates a week. Today, he's lucky if he makes 30. Work from other clients showed a similar drop. "In October to November of last year, the faucet just turned off. I've been through a lot of recessions," says Frost, who is the fourth-generation owner of the company. "I've never seen orders stop so fast. Sales dropped 40% in a month and they have stayed down since."

One bright spot for Frost is local universities and colleges, which continue to demand signage as they renovate dorm rooms and build new buildings. And of course, there's always the weather. "When the snow goes away, we get some business from all those signs that get wrecked by the plows," he says.

For the nation at large, there are a few early indicators of economic thaw. November brought hope on the job front when the nation's unemployment rate dropped to 10% from 10.2% and U.S. employers cut 11,000 jobs, the lowest monthly job loss in nearly two years. But experts say jobs remain a lingering concern that will continue to reverberate into other areas of the economy.

Jobs are an essential component of a full real estate recovery, says Wharton real estate professor Peter Linneman. "Jobs are what fill space -- think of an office building. A lot of [economic indicators] matter, but jobs really matter."

Linneman says he couldn't pick just two or three economic indicators that would tell him where the economy was headed, saying he watches about 50 metrics involving GDP, jobs, manufacturing, output, capital flows and more. "I view the world as a Seurat painting--a whole lot of dots that alone mean very little, but taken in a larger context, they make a bigger picture. You have to get far enough away to see the picture, but close enough to see the dots. And the dots constantly change. It's like a motion picture of dots rather than a still-life of dots. It's like a Seurat movie. And the picture is the economy."

For Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Initiative, dots come in the form of shopping bags. And she is starting to see some positive paper-bag indicators: There seem to be a few more shopping bags on the streets of Manhattan, for example. Many of those bags sport store logos--a switch from the end of 2008, when flagrant spending became taboo.

"People are more comfortable purchasing at this point than they might have been last year," Armendinger says. "During holiday 2008, we heard stories of people asking for plain whitebags at high-end stores [because]they were not comfortable with what others thought of them spending money. We are not seeing that now."

Still, there's a long way to go, especially if unemployment persists. "Unemployment has a psychological effect on people," Armendinger adds. When unemployment is rising, even people who have jobs may be skittish about splurging on discretionary items, putting a damper on retail sales. She thinks the retail industry will be watching comparable store sales during the holiday season to see if shoppers spend more than they did in the same period last year. Retailers will also be watching "conversions"--that is, how many shoppers who walk into the store actually buy something instead of just looking around. And in the malls, retailers will be paying attention to foot traffic as a sign of consumer confidence.

"If people are not confident enough to go to the mall, then there's not even a chance of converting them," says Armendinger. Retailers need to get consumers "through the door, get them spending, and get them spending at full price. Until that happens, we don't really have a healthy economy."

How Employee Engagement Turned Around Campbell's

An interview with Douglas Conant, CEO of Campbell Soup Co.

June 23, 2009
Forbes.com

by Terry Waghorn

When Douglas Conant was brought in from Nabisco to be chief executive officer of the Campbell Soup Co. in 2001, Campbell had devolved into what one magazine called "a beleaguered old brand." Sales for its largest product line, condensed soups, had declined amid intense competition, and the company was rumored to be near being taken over by one of the food industry's best performers. Eight years later, Conant is well on his way to fulfilling the mission he then set for himself, taking what he called a "bad" company and lifting its performance to "extraordinary." He has done it with cost-cutting, smart innovations, increased marketing and, especially, a concerted effort to reinvigorate the workforce.

The strategy isn't complicated. "To win in the marketplace," he has said, "we believe you must first win in the workplace. I'm obsessed with keeping employee engagement front and center and keeping up energy around it."

Gallup, the polling and research firm, studied the engagement levels of Campbell's ( CPB - news - people ) managers in 2002 and found that not only did 62% of them consider themselves not actively engaged in their jobs, a full 12% felt they were actively disengaged. Those numbers, Conant says, were the worst for any Fortune 500 firm ever polled. Today, the story is far different: 68% of all Campbell employees say they are actively engaged, and just 3% say they are actively disengaged. That's an engagement ratio of 23-to-1, and Gallup considers 12 to one to be world-class.

That massive shift has led to a dramatic turnaround in the firm's performance. In an industry that is known more for stability than for growth, Campbell has organically increased its earnings (exclusive of acquisitions, divestitures and the like) by up to 4% a year over the last eight years, with earnings per share growing 5% to 10% a year. Those figures put it near the top of its industry. Investors in Campbell have done quite well too. The total return on Campbell stock, assuming reinvested dividends, is more than 30% over that period, during which the Standard & Poor's 500 index has lost more than 10%.

Conant's use of employee engagement has been so successful that it is held up as a model in the book Closing the Engagement Gap--How Great Companies Unlock Employee Potential for Superior Results, by Julie Gebauer and Don Lowman.

Forbes: How did you know employee engagement could be so crucial?

Conant: I saw that of all the measurable elements related to culture building, engagement correlates closest to shareholder returns. We can use engagement as a tool to measure our progress in building a high-performance culture and to set higher standards for our leaders.

How did you begin the process of getting your employees more engaged?

One of the first things I did was make it clear I understood that Campbell as an organization needed to demonstrate its commitment to its people before they could be expected to demonstrate their own extraordinary commitment to it and its success. This understanding became the basis of what we call the Campbell Promise, which is summed up by the phrase, "Campbell valuing people, people valuing Campbell."

Recognizing that actions speak louder than words, I've never missed an opportunity to express that promise in tangible ways that everyone can touch and feel. When I first got to Camden, N.J., our facility there was surrounded by barbed wire. It looked and felt more like a minimum-security prison than a corporate headquarters. I didn't waste any time taking down the fences and replacing them. Even more effective was the act of replacing 300 of the company's 350 leaders within the first three years. Half of the new leaders were promoted from within the company. As you can imagine, that changed the culture and sent a message that few could ignore.

How have you hardwired engagement into the culture?

We have developed a continuous loop for closing the engagement gap. We survey all our 580 work groups at the same time every year. Managers then review the results with their managers. Finally, every manager meets with all their direct reports to update their progress on clearly articulated goals. We also evaluate our leaders, and the No. 1 criterion they're measured on is their ability to inspire trust in those around them.

The other thing we do is celebrate at a high level when people do things well. Learning to celebrate success is a key component of learning how to win in the market. On a personal level, I send out about 20 thank-you notes a day to staffers, on all levels. And every six weeks I have lunch with a group of a dozen or so employees, to get their perspective on the business, to address problems and to get feedback.

What is the biggest benefit that has come from increasing your engagement?

Besides our improved financial and market performance, the biggest benefit has been the revitalization of our whole culture. We're performing at a higher level, we've become more innovative and we've become more self-governing. That all contributes to our being on track to have one of our best years ever, despite the worst economy of our lifetimes.

Terry Waghorn is an adviser to senior executives. He is co-author of Mission Possible and author of The System.

Employee Engagement Stats from Harvard

Fri., Dec. 11, My Strategic Plan (blog)
by Ed Adkins

Harvard Business Publishing recently posted the results of an employee survey to their Daily Stat blog, claiming that employees are more appreciative and enthusiastic about their jobs than a year ago. From 2008 to 2009:

* Employees who take pride in their jobs rose from 71% to 79%
* Those who recommend their employer rose from 53% to 58%

Since MyStrategicPlan is frequently used as an employee engagement tool or performance management software, we take a close look at the general level of engagement found across the US. But just like the writers at the Be Excellent blog, I question whether these findings truly indicate a more engaged workforce.

During the recession, with jobs being scarce, it stands to reason that employees would take pride in their jobs; they actually have jobs, unlike many of their unlucky neighbors.

…And about whether they’d recommend their employer, with so many people out of jobs, almost everyone has a friend who has asked for help looking for employment. If a job opens up at someone’s place of business, they’re far more incentivized to tell their friends about it than they were when jobs were plentiful.

With other recent reports and pundits warning that a recession recovery will present challenges in employee retention, I don’t believe Harvard’s rosy take on their daily stat should be a signal to employers that their people will stay put.

More than ever, it’s time to make sure that your people are engaged, that they see where they fit in your organization and they know how you plan to get where you’re going- together.

"Involve Your Employees," Says Google, CEB

A culture of involvement drives employee engagement and success

Fri., Dec. 11, 2009: Business Week

By the Staff of the Corporate Executive Board

As 2010 planning initiatives focus on strategies that will prepare companies to return to growth, leaders are looking for new ways to engage critical talent who execute key business priorities. The reason? Research by CLC Genesee, the HR consulting and employee survey division of The Corporate Executive Board (CEB), shows that companies with highly engaged employees demonstrate a 3-year revenue growth of 20.1%, compared to the 8.9% their industry peers will average. They also establish a 3-year EBITDA growth that is three times higher than their industry peers.

What's more, CLC Genesee research shows that shifting an individual employee from low engagement to high engagement can increase discretionary effort level by 60%, improve employee performance by up to 20%, and significantly reduce recruitment costs.

To achieve high levels of employee engagement, you need to first understand what they are thinking. One way to do this is to collect employee feedback through regular employee surveys. However, successful companies don't just rely on surveys as an event, but also steadily maintain communications and actions throughout the year to continually involve employees in driving positive change. One progressive and admired company leading the way is Google.

Google firmly believes that feedback and discussion are an important part of doing business, and finds avenues for "Googlers" (as Google employees are called) to not just raise problems but help solve them. Google's annual survey is critical in gathering employee feedback on what is working well and what can be improved. Beyond the survey, Google uses a variety of regular feedback channels to encourage employee involvement and leverage its philosophy that more minds on an important issue are better than one.

Strategy 1: Create a two-way dialogue on the most important issues on people's minds.

Open dialogue between employees and leaders has always been an important part of Google's business operations. Every Friday, Google holds a forum called "Thank goodness it's Friday" (TGIF) to have an active conversation and answer questions ranging from product decisions and external news to internal people-related policies and decisions.

This program initially started small with a few employees asking the founders questions on a Friday afternoon. As it evolved, TGIF now occurs almost every Friday, and the notes are distributed broadly across the company. Googlers use Google Moderator, an online tool to submit and vote on questions, and the top-voted questions are directly answered by Google's founders and executives.

TGIF also includes live questions. High levels of employee and executive participation in TGIF contribute greatly to the culture of transparency and create a more intimate atmosphere despite the company's size of 20,000 employees.

Strategy 2: Engage employees in solving problems, not just raising them.

Google encourages employees to attend problem-solving sessions designed to resolve business challenges. Appropriately called "Fixits," these sessions can invite a specific group of employees or be open to anyone. One recent Fixit addressed particular concerns regarding career development in a growing business unit.

For one week, suggestions for how to improve career development were collected via Moderator. Googlers submitted 51 ideas, in total receiving 5,615 votes, and the best three ideas were implemented. As employees were involved in the solutions, satisfaction in many areas in the annual employee survey improved one year later, including double-digit increases in the favorability scores on two career development items.

As demonstrated by CLC Genesee research, increasing employee engagement has clear business benefits. Following the lead of companies such as Google, organizations can creatively find new ways to encourage and collect employee input on important issues to achieve measurable business outcomes. It's not about making employees feel involved; it's actually involving them. The result is more informed leaders, more engaged employees, and ultimately better decisions for a stronger business.

The Emerging Field of Enterprise Engagement

The Emerging Field of Enterprise Engagement
from the Articles Section of Enterprise Engagement Alliance

The field of Enterprise Engagement focuses on achieving long-term financial results for organizations by strategically aligning the management of customers, distribution partners, employees, salespeople and all human capital. Enterprise Engagement is distinct from the fields of financial management, marketing, sales, operations and human resources in that it seeks to achieve long-term success by integrating these various business disciplines to continually focus the organization on identifying and meeting customer needs.

Organizations based on Enterprise Engagement work collaboratively across business units to find the best way to achieve long-term financial results by maximizing human capital, both internally and externally. The goal is to unify the organization to continually seek better ways to help customers and create new opportunities for the business rather than simply finding ways to improve processes. Enterprise Engagement looks at human capital in an integrated fashion, rather than separating customer and distribution partner engagement from sales or employee engagement.

AstraZeneca, McDonald’s, Southwest Airlines and Campbell Soup are examples of companies run on the basis Enterprise Engagement.

In contrast to organizations run under the principals of Enterprise Engagement, traditional businesses tend to use a siloed approach in which each department or division often works with significant independence, often with different, unrelated goals. This type of organization has a tendency to focus on maintaining and improving processes as a way for each business unit to gain more resources and influence. Many companies are willing to sacrifice customer service to save money, such as instituting voice mail systems well known to annoy most people, often unable to measure any financial cost to the dissatisfaction of customers. It is easier to measure the cost-savings than the value of customer engagement. READ MORE...CLICK HERE TO SEE THE FULL SOURCE

Also check out Bruce Bolger's other Enterprise Engagement Alliance Blog posts

Play the Game You Know You Can Win

Play the Game You Know You Can Win
Tuesday June 2, 2009
By Peter Bregman (reprinted with author permission)

How can a few pirates in small boats capture and hold huge tanker ships hostage? How can a few scattered people in caves halfway across the world instill fear in the hearts of millions of citizens in the largest, most powerful countries in the world? How can a single independent contractor beat out a 30,000-person consulting firm to win a multi-million dollar contract?

In A Separate Peace, John Knowles' coming-of-age novel, Phineas invents the game Blitzball, in which everyone chases a single ball-carrier, who must outrun every other competitor. And, as it happens, Phineas always wins. Because he created the rules that favor his particular skills.

That's the secret of the successful underdog. Play the game you know you can win, even if it means inventing it yourself. Entrepreneurs intuitively understand this; they start their own companies for exactly this reason. I know a tremendous number of extremely successful people who could never get a job in a corporation because they never went to college. So they started their own companies; companies they designed to play to their unique strengths. They invented a game they could win, and then they played it.

In Moneyball, Michael Lewis, one of the great storytellers of our time, explains how the Oakland As, with $41 million in salaries, consistently beat teams with over $100 million in salaries. The richer teams hired the top players based on the traditional criteria: the highest batting averages, most bases stolen, most hits that brought a runner home, and, get this, the all-American look.


CLICK TO READ THE REST OF THE ARTICLE

Peter Bregman writes a weekly column called How We Work at Harvard Business and is a regular contributor at CNN. He speaks, writes, and consults about how to lead and how to live. He is the CEO of Bregman Partners, Inc., a global management consulting firm, and advises CEOs and their leadership teams. You can sign up to be notified when he writes a new article. Bregman is the author of Point B: A Short Guide To Leading a Big Change and can be reached at www.peterbregman.com.

How to Fly Over Recessionary Obstacles

Originally published in www.HarvardBusiness.org.
Tuesday August 4, 2009

By Peter Bregman (reprinted with author permission)


Win, my mountain biking partner, and I looked down the ten-foot drop.

"Should be fun," he said as we backed away from the edge and climbed up the hill to get some runway. I wasn't so sure. He climbed on his bike, pedaled to get a little speed, and took the plunge, effortlessly gliding over the rocks, roots, and stumps.

My turn. I felt the adrenaline rush as I clipped my feet into the pedals. My heart was beating fast. My hands were shaking. I took a few tentative pedal strokes forward and inched up. I felt my front tire go over the edge and I started to descend, checking my speed as I weaved around the obstacles.

Suddenly I hit something and my bike abruptly stopped. But I didn't. I flew over my handlebars and ended up on the ground, lying beside my bike, front wheel still spinning.

"Dude," Win laughed, "You OK?"

"Yeah." I brushed the dirt off my elbows. "What happened?"

Neither of us knew. So I picked up my bike, climbed up the chute, and did it again. Not just the chute, the whole thing: the adrenaline, the weaving around the obstacles, the abrupt stop, the flying over the handlebars.

"Dude," Win laughed again. I was officially in the movie Groundhog Day. I climbed back up the chute and did it again. And again. I must have done it five times before I figured out what was stopping me.

Me.

A mountain bike has to be going fast enough to make it over an obstacle. The bigger the obstacle, the more momentum the bike needs to get over it. There was one big unavoidable rock, and each time I came upon it I unconsciously squeezed on my brake. That slowed me down just enough to turn the rock into an insurmountable wall.

I needed more speed to keep moving. So I climbed back up and did it again. I stared at the rock and picked up speed. I kept my eyes on it right to the point where I squeezed on my brakes and flipped over my handlebars again.

I knew what I had to do but I couldn't do it. It was just too scary. As long as I was focused on the rock, I couldn't prevent myself from braking.

But I wasn't ready to give up. So I climbed back up and tried one more time. This time, I decided to focus ahead of me - ten feet in front of where I was at any point in time. So I would see the rock when it was ten feet away, but I wouldn't be looking at it when I was going over it.

It worked. I slid easily over the rock and made it down the chute without falling.

I'm a huge proponent of living in the present. If you pay attention to what's happening now, the future will take care of itself. You know: don't regret the past, don't worry about the future, just be here now and all that.

But sometimes, focusing on the present is the obstacle. Take driving a car, for example. If you didn't look ahead to see where the road was going, you'd keep driving straight and crash at the next curve. When you're driving, you never actually pay attention to where you are; you're always paying attention to what's happening in the road ahead and you change course based on what you see in the future.

It's the same with running a business. These days I see a lot of leaders who remind me of me mountain biking down that chute. They look with fear at their current numbers or at the government's current reports, and then without meaning to, they squeeze the brakes. In some cases they're still laying people off or, at least, not hiring. They've drastically reduced training or stopped it altogether. Their employees are still worried about their jobs and they, the leaders themselves, aren't reassuring them because they're worried about their jobs too.

READ THE REST OF THE ARTICLE AT:
http://blogs.harvardbusiness.org/bregman/2009/08/how-to-fly-over-recessionary-o.html

Peter Bregman writes a weekly column called How We Work at Harvard Business and is a regular contributor at CNN. He speaks, writes, and consults about how to lead and how to live. He is the CEO of Bregman Partners, Inc., a global management consulting firm, and advises CEOs and their leadership teams. You can sign up to be notified when he writes a new article. Bregman is the author of Point B: A Short Guide To Leading a Big Change and can be reached at www.peterbregman.com.

A New Rule for the Workplace

A New Rule for the Workplace
Originally published in www.HarvardBusiness.org.
Thursday September 10, 2009

By Peter Bregman (reprinted with author permission)

A few months ago my wife Eleanor came home upset after an incident with one of the parents at our daughter's school. That afternoon, when Eleanor said hello to Michelle, Michelle completely ignored her. Thinking maybe Michelle hadn't heard her, Eleanor said hello again, this time louder. Again, no response. Michelle wasn't speaking on the phone or in a conversation with another parent. She was able to respond, she just refused to. Eleanor was getting the silent treatment. Not one to give up, she said hello a third time. Finally, Michelle mumbled something without looking up and walked away.

Eleanor wasn't friends with Michelle. They had only spoken a few times in the past, most notably when she called Eleanor to complain about something our daughter did. Still, she was thrown off balance by Michelle's cold shoulder. It was one of those small things that's hard to get out of your mind. She wasn't expecting it.

READ THE REST OF THE ARTICLE AT:
http://blogs.harvardbusiness.org/bregman/2009/09/a-new-rule-for-the-workplace.html


Peter Bregman writes a weekly column called How We Work at Harvard Business and is a regular contributor at CNN. He speaks, writes, and consults about how to lead and how to live. He is the CEO of Bregman Partners, Inc., a global management consulting firm, and advises CEOs and their leadership teams. You can sign up to be notified when he writes a new article. Bregman is the author of Point B: A Short Guide To Leading a Big Change and can be reached at www.peterbregman.com.

What is Engagement -- more perspectives

From Diversity Inc.

Employee engagement is defined as the degree to which workers feel job satisfaction and an emotional connection to the success of their businesses, resulting in improved productivity, innovation and retention. Highly engaged employees use their discretionary efforts to "go the extra mile" to do whatever it takes to ensure the organization meets its business goals.

Only 29 percent of workers are actively engaged at work, according to a 2008 Employee Engagement report by BlessingWhite. Employees with the highest level of engagement perform 20 percent better and are 87 percent less likely to leave the organization, according to a survey by TowersPerrin. A study by the Hay Group found engaged employees were as much as 43 percent more productive.

Engagement varies widely by race, ethnicity, gender, age, sexual orientation, disability and other workplace-diversity factors. Companies that have highly developed diversity-management initiatives have higher engagement in these traditionally underrepresented groups, according to research by DiversityInc.

What factors most contribute to employee engagement? Numerous studies have found these are the key factors:

Corporate Culture: A corporate culture that puts priority on trust and respect for all, effectiveness of communication in the company (organizational communication), diversity of opinions and perspectives, a safe working environment, a company with branding as a leader in diversity and corporate social responsibility

Management: Relationships with supervisor, relationships/recognition with/from upper management, overall recognition and praise, coaching, mentoring and feedback, clear expectations, clear and consistent performance reviews

Peers: Relationships with colleagues/teammates, membership in employee-resource groups

Training: Opportunity to attend external seminars/training, access to technology and training, resources to complete the job well

Personal: Real and perceived career-advancement opportunities, opportunity to participate in decision making, work/life balance, compensation, alignment of personal values with company values, job security

Employee engagement: What exactly is it?

By Patrica Soldati

For several years now, 'employee engagement' has been a hot topic in corporate circles. It's a buzz phrase that has captured the attention of workplace observers and HR managers, as well as the executive suite. And it's a topic that employers and employees alike think they understand, yet can't articulate very easily.

No wonder. It turns out that all that employee engagement research undertaken over the past few years has defined the term differently, and as a result, came up with different key drivers and implications.

Enter The Conference Board, a prestigious, non-profit business membership and research organization located in the U.S. This group provides its members — top executives and industry leaders from the most respected corporations in the United States and around the world — with vital business intelligence and forward-looking best practices.

In 2006, The Conference Board published "Employee Engagement, A Review of Current Research and Its Implications". According to this report, twelve major studies on employee engagement had been published over the prior four years by top research firms such as Gallup, Towers Perrin, Blessing White, the Corporate Leadership Council and others.

Each of the studies used different definitions and, collectively, came up with 26 key drivers of engagement. For example, some studies emphasized the underlying cognitive issues, others on the underlying emotional issues.

The Conference Board looked across this mass of data and came up with a blended definition and key themes that crossed all of the studies. They define employee engagement as "a heightened emotional connection that an employee feels for his or her organization, that influences him or her to exert greater discretionary effort to his or her work".

At least four of the studies agreed on these eight key drivers.

Trust and integrity – how well managers communicate and 'walk the talk'.
Nature of the job –Is it mentally stimulating day-to-day?
Line of sight between employee performance and company performance – Does the employee understand how their work contributes to the company's performance?
Career Growth opportunities –Are there future opportunities for growth?
Pride about the company – How much self-esteem does the employee feel by being associated with their company?
Coworkers/team members – significantly influence one's level of engagement
Employee development – Is the company making an effort to develop the employee's skills?
Relationship with one's manager – Does the employee value his or her relationship with his or her manager?

Other key findings include the fact that larger companies are more challenged to engage employees than are smaller companies, while employee age drives a clear difference in the importance of certain drivers. For example, employees under age 44 rank "challenging environment/career growth opportunities" much higher than do older employees, who value "recognition and reward for their contributions".

But all studies, all locations and all ages agreed that the direct relationship with one's manager is the strongest of all drivers.

In the final analysis, one wonders whether employee engagement is just another trendy concept, or really a big deal?

According the report, employee engagement is a very big deal. There is clear and mounting evidence that high levels of employee engagement keenly correlates to individual, group and corporate performance in areas such as retention, turnover, productivity, customer service and loyalty.

And this is not just by small margins. While differences varied from study to study, highly engaged employees outperform their disengaged counterparts by a whopping 20 – 28 percentage points!

Finally, there is some evidence that companies are responding to this employee engagement challenge - by flattening their chains of command, providing training for first-line managers and with better internal communications. Changes won't happen overnight, but with such significant upside to the bottom line - they might happen more quickly than you think.

Does Greater Employee Engagement = More BFFs?

by Mark Harbeke

Is the number of BFFs (Best Friends Forever) a company creates among its workforce from effective employee engagement activities directly tied to the number of highly engaged employees it has (which affects everything from retention to productivity)?

That's my takeaway from reading Catherine Mattice's synthesis of employee engagement research on "High-Quality Connections" by Jane Dutton and Emily Heaphy on the No Workplace Bullies blog. Mattice writes that "People who have a best friend at work are more highly engaged and significantly more likely to engage their customers."

Maybe Winning Workplaces' Top Small Workplaces are hip to the same academic findings. A trend of our winning organizations is that they use their small size to their advantage by creating a work environment and team building activities that they actively bill as "family friendly."

Now, I'm not saying that just creating the conditions for a "work family" means that teams are hanging out at the local watering hole three times a week. But we've seen that doing so increases the likelihood for a scenario like this to play out – and that, in turn, increases innovation because casual conversations drift into "shop talk."

Worker Unhappiness is Worker Unhappiness, in Any Unemployment Environment

by Mark Harbeke

There's a weird duality going on right now in the workforce. Unemployment recently topped 10% nationally – the highest it's been in over 25 years. This is distressing, to be sure, but what really has my attention is studies like the one referenced here which tell us that despite the bleak job outlook, lots of employees are unhappy with their current jobs and are looking to leave as soon as they can.

Surveying over 900 North American workers, Right Management found that 60% intend to leave their jobs – although the asterisk here is, if that the economy continues to improve. In an editorial a few months ago, Winning Workplaces pointed to a study in Newsweek which found that half of American employees say they'll look for a job once the recession ends.

Of course, we're not out of the woods yet when it comes to our fragile economy. Much more recently – last month – Newsweek reported that a new, "echo" market bubble may be brewing. If what the magazine describes plays out, and this bubble bursts like the last one, no doubt many workers will be changing their minds in these turnover-focused polls and push back or put off entirely their plans to change jobs.

I continue to believe that meaningful employee engagement and team building strategies can be the glue that helps hold companies together and keep them going, especially small ones when we face macro-economic problems like market bubbles bursting. In bad times, leaders can turn to these practices to level with their staff and take a temperature read on making group sacrifices, such as across-the-board pay cuts, so layoffs can be avoided.

We have written extensively about the chief benefits for companies that "share the pain" in tough times: retention of their valuable workforce, and competitive advantage over their peers when the latter inevitably need to do more hiring in a short time when things pick up. But there is another, less tangible but no less powerful benefit: companies whose workplace culture is all about communications team building have happier employees.

And happier employees, as Administaff and many others have concluded, are synonymous with greater productivity. That sets up a foundation for success, in any economy.